My question relates to the tax implications of purchased puts that expire worthless (no gain, but loss based on the purchase price). These puts exist to protect invested positions.

Suppose I purchase puts on SPY at a strike price that results in a cost of $1500 to hedge an invested position for the upcoming year. Ideally, the SPY does well and the puts expire worthless with a full loss on the $1500, but the investment position in the SPY is protected.

For tax purposes, is the $1500 considered a capital loss against any capital gains for the year?


For a long option that expires, the cost is a capital loss . Whether it is a long term or short term capital loss depends on the holding period.

Short options that expire are treated as short term gains, regardless of the holding period.

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